“I was shocked. Perhaps, I shouldn’t have been shocked in hindsight. It was obvious that my project was not going to work after some changes at Reddit, but only in hindsight,” Charles tells Hacked. He concluded he needed to leverage the newsworthiness of his firing to ensure he could continue earning an income, as he had no backup plan.

“Since it was newsworthy it led a whole bunch of people to reach out to me, which opened up new opportunities for me,” he said. “I deliberately talked about it in public to make sure I met a lot of people.” The experience was not easy, as anybody who unsuspectedly lost their job knows.

“I had never been fired before,” Charles told me. “On day one, I was super, super stressed. A bunch of people contacted me and I was able to interview at companies right away.” For a few weeks, the uncertainty about his future caused him stress. “In San Francisco, my rent is very expensive, so it is stressful without income,” he said. In the end, he sees the change as positive.

“In hindsight it all makes perfect sense,” Charles said. “I feel like I am better off any way. If I had stayed with Reddit, I couldn’t have done what I was interested in doing.” His new project fits better outside of Reddit.

Ryan Charles // Twitter

According to much press coverage, Charles has embarked upon a decentralized Reddit project. Charles does not see it that way exactly. “It’s a bit of a misnomer because I don’t think things are going to look and feel like Reddit.”

The former Reddit cryptocurrency engineer believes a solution is possible, and will hold a hackathon on Saturday towards that end. His new project, Datt, which stands for “Decentralize All The Things,” represents a decentralized platform where users own their content.

Using the core technology behind Bitcoin, Charles envisages a mainstream application that functions like Reddit. Employing the power of Bitcoin’s distributed public ledger, Charles envisages an alternative to Reddit distributed across thousands of computers known as nodes.

“If we pull this off, the goal is to make a mainstream applications where users can directly award each other and achieve that vision of leveraging Bitcoin in a way so that anybody can participate and pay each other for their content,” Charles said.

Charles’ idea calls for a P2P network that runs like a normal web app. Each user funds an app with a small amount of Bitcoin, which functions to download content. Users pay a small amount of Bitcoin to incentivize people to keep the app connected. An upvote triggers a transaction of a small amount of Bitcoin to the content creator.

“I think it will be better for people who want to produce really valuable content,” he said.

At a technical level we have to implement a bunch of stuff to make this possible. However, it is possible in theory. I think we will probably want to integrate the Lighting Network, where users can enable micropayments.

The reason the Lightning Network would be useful is Bitcoin’s limits when it comes to tiny transactions.

“No one has implemented the Lightning Network yet,” Charles points out. “We are going to need to make it user-friendly and integrate it into the world wide web.” Not only technological challenges face Datt. There’s also the ‘community problem.’

Many people have tried to build a community. But if no one uses it, you don’t have a community. It’s harder to build a self-sustaining community through a website or an app than the technology itself is at this point.

There will be similarities in layout between Datt and Reddit.

“The application will look like Reddit, I think, but the technology underneath will be completely different because anyone can run a node and share content and host content sans a central server.” The technology incentivizes users completely differently than Reddit.

“Money will be integrated into the very core of Datt, so the incentives would be much different, inspiring users to produce quality content so they get paid.” Currently, people are frustrated with the tools made available by Reddit, as well as the lack of communication from the company.

Charles posits that Reddit’s centralized nature causes these problems. One of Datt’s goals would be to monetize user content, ensuring it stayed their intellectual property. DATT strives to create a system in which moderators and contributors earn money mostly through a tipping system like ChangeTip.

“Reddit, the company, controls all the content, so it is lose-lose for the moderators and users,” Charles explains.

My system will empower them to own their content, so many of the issues Reddit currently faces are non-issues.

A block chain grounded system would ensure content cannot be removed retroactively. Operators of nodes on Datt would pick-and-choose information they would like to hide. If individuals grew frustrated with a specific nodes practices, they would switch to another node.

“They can just share their own node and moderate themselves without worrying about a conflict while benefitting financially from creating good content.” In Charles’ mind, this is a huge missed opportunity for Reddit.

“This technology makes things possible not previously possible when Reddit and all other social media companies were invented. Back then, advertising was the only way to earn revenue, so the products were all designed around advertisements,” Charles, who publishes his ideas for Datt at Medium, observes.

Bitcoin and related technology makes new business models possible. It’s a missed opportunity for Reddit to make new types of products that could have been revolutionary. If Reddit initiated peer-to-peer payments in the website, there could be a whole Reddit economy possible.

Charles believes the easiest path for this would have been to integrate further with ChangeTip.

Reddit has already seen its market share drop due to redditor’s discontent with recent changes made by the company. Some have signed up for Voat, a Swiss-based Reddit-esque website with a marketing campaign that highlights commitment to free speech.

Venture Capitalist Fred Wilson penned a blog post in which he entertained the notion of something like Charles’ idea, stating there is a “very interesting opportunity to build a truly decentralized media platform.”

To join in the hackathon, learn more here. Hackathons will be held in Mumbai, Buenos Aires and San Francisco. An online version will hopefully be available at the Slack channel.

Images from Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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5 stars on average, based on 1 rated postsJustin O'Connell is the founder of financial technology focused CryptographicAsset.com.
Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California.
His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.

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Many Great Things to Come

Many thanks for all the comments and feedback from yesterday’s blog about my trip. Many of you were asking to be more specific about the information that I received there. So I did want to let you know that most of what I did was more networking and meeting people than anything else.

In line with that, I did meet some people who blew my mind with some of the things they’re working on. I have added all of them to this daily update and asked many of them to send back further details about what they’re doing so I can update all of you on these exciting projects.

The experiences we have help shape who we are and influence what we say and do. So expect further updates about this in the coming weeks and months.

To answer your question more pointedly, the main takeaway that I got from Davos was that each individual has the power to change the world. However, the key to doing it is not by making it your end goal. Rather, find something positive that you are passionate about and work hard on it.

“If you want to change the world start by making your own bed.” -Admiral William McRaven

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Time of War

Dollar Getting Crushed

Weiss on Crypto

Please note: All data, figures & graphs are valid as of January 25th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The big boys are talking in Davos and it seems to be influencing the markets a bit. On Tuesday, President Trump imposed some tariffs on a few specific import items that are usually made in China. Suspicions that Trump was finally making good on his campaign rhetoric to start a trade war with China seem to have been confirmed yesterday by Wilber Ross…

Stocks around the world are taking a bit of a hit as the increased possibility of an all-out trade war between the world’s two biggest economies.

Adding fuel to the fire, US Treasury Secretary Steven Mnuchin seemed to have changed his mind about the US Dollar’s role in the economy. Previously he had been advocating for a stronger Dollar but yesterday he was quoted as saying…

These comments are actually more in line with what Trump has been saying from the beginning but now that Mnuchin seems committed, the Dollar had a grand sell-off, falling to its lowest point in more than three years.

The weaker Dollar sent Gold and Oil up to fresh highs as well and we can also observe a stronger Japanese Yen.

Crypto Ratings

For the longest time, I’ve been telling people that we need a better way to grade cryptocurrencies. The market cap is one metric but it’s really only a small part of the story and not a great indication of the strength or viability for most digital assets.

It seems now that the crypto craze is going mainstream, an official US rating agency just released a comprehensive grade on 74 of the top traded cryptos.

At first glance, it looks like they actually did a pretty good job. It makes sense that none of them got an A rating. This is an extremely risky market and it would be really misleading to say that any of them are “solid” investments.

I really liked that Ethereum was rated slightly higher than Bitcoin, and their reasoning is exactly what we’ve been talking about in these daily updates. The Bitcoin blockchain is congested.

The event was a bit chaotic and their website went down due DDoS hacking and a massive surge in visitors.

For cryptotraders, this is the first really great event so far this year. This is a direct endorsement by an established financial firm and cements the “cryptocurrency” label as an acceptable asset class in the eyes of the world. Since the announcement, we’re seeing a nice rally in the market.

As we stated previously, prices might fall further but they don’t necessarily have to. If momentum off this event builds or we get some other positive updates, we could be in for some great things ahead.

As always, let me know your thoughts and opinions. Post directly to my wall on eToro or tag me on any other social network.

Have an outstanding day!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation. The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro. Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose. Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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My Davos Experience

Humble apologies for the format of today’s Email. The markets, crypto and stocks, have been rather flat over the last 24 hours so there should be no need for price graphs and this should actually be a good point for reflection. I apologize as well for the delay in getting it to you. I’ve been from plane to plane to train to meeting to train since Sunday night and now writing to you from the Starbucks at ZRH.

Would like to wish a very warm welcome to all the new people who are getting the daily market update for the first time today. Though this trip was very short, it was incredibly productive. In addition to the scheduled meetings, I managed to meet scores of interesting people who I hope to stay in touch with for many years to come.

It was incredible to see the overwhelming presence of crypto and blockchain enthusiasts. In the center of the main promenade in Davos were two buildings that happened to be next door to each other.

Crypto HQ was filled with new age anarchists and revolutionaries, people involved in all sorts of ICOs and other fascinating projects, many of which with a good chance to change the world for the better.

Next door was the more elegant looking Ethereal Lounge that was put up by Consensys and hosted the Enterprise Ethereum Alliance. The people there were more involved in the integration of blockchain into already existing frameworks like government and big business, mostly using the Ethereum blockchain.

As most of my time was spent in these two buildings, I didn’t get the chance to “rub elbows” with the rich and famous. It was very interesting to see some of the sneers and smiles from people passing by the crypto events. It felt like some people saw us more as unwanted party crashers then the builders of the next layer of the internet.

In fact, there are two events on the main stage today that emphasize this dichotomy. The “crypto asset bubble” will have anti-blockchain enthusiasts speaking but the second is actually called “the remaking of global finance” and will have speakers like Steven Mnuchin and Christine Lagarde.

From my perspective, I’d much rather ignore the naysayers. They will come around once blockchain technology is more tangible and user-friendly. Certainly, I’d be happy to help educate them but only if and when they’re interested. It does seem though, that we’ve managed to push through all that. Much more people are now aware of this revolution and plenty of bright people are getting involved. Probably the incredible price movement had something to do with that but now that the genie is out of the bottle people are using it to improve their own lives and the lives of others and at the end of the day that’s what Davos is supposed to be about.

Was very proud to represent eToro in a place like this.

Have an amazing day ahead. As always, feel free to reach me with any thoughts questions or comments.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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How have various asset classes performed during previous wars

North Korea, the dictator ruled nation has been threatening the US and its allies with a possible missile attack, which may also have a nuclear warhead on it. The experts are divided on the actual capability of North Korea to undertake the attacks, however, its leader, Kim Jong-un leaves no opportunity to provoke the US and its allies.

The US national debt is likely to balloon if US involves itself in South Korea’s reconstruction after the war ends

Though North Korea’s military prowess is nothing great to write home about, it can still cause extensive damage to millions of civilian lives and the economy of its neighbor South Korea, to some extent Japan and the US territory of Guam. However, in this article, we shall restrict ourselves to the impact of the war on various asset classes and the world economy. We shall use the historical evidence to arrive at our conclusion.

How does the US stock market perform during wars?

The US has fought several wars since 1960 as shown above. While a few ended quickly, others have been a long-drawn affair. Notwithstanding, Barron’s has outlined the effect of the following seven major hostilities on the Dow Jones Industrial Average since early 1980s.

The markets hate uncertainty; a proof of this is the average 0.6% drop in the Dow a month prior to the start of the conflict.

However, once the conflict commenced, the Dow quickly turned direction, rising 4% in the first month. The rally did not stop there. Over the next three months, the Dow rose an average 6.7%, and the gains swelled to 7.2% after six months of the start of the conflict.

Therefore, if history repeats itself, a war between the US and North Korea – if it were to happen – will not start the next bear market.

How does gold perform during wars?

Gold is considered as a safe haven during times of uncertainty. Therefore, the yellow metal has rallied from about $1260/toz to about $1360/toz levels, as tensions escalated between North Korea and the US.

But, will gold continue its rally if the war starts?

Economists at Capital Economics have analyzed gold’s performance since 1985, during military conflicts, acts of terror and political tension.

They established that “over the past forty odd years, the price of gold has on average risen by 4.1% in the six months prior to a conflict turning into a full-blown war. However, it barely moved in the months following the event. This makes sense as gold thrives in periods of elevated uncertainty and the start of an armed conflict partly erases that.”

Performance of long-term bonds during wars

Though bonds are also considered as a safe haven investment, their performance has lagged their historical average during wars, according to a study by the CFA Institute. The possible reasons are an increase in inflation during war times and the second is the higher borrowing by the government to fund the war. Due to these two, bond prices fall. Therefore, selling out of stocks and buying bonds fearing a conflict might not prove to be a good strategy. The only aberration was during the gulf war when bonds beat stocks, albeit marginally.

How does the war affect the US dollar?

The evidence of the past three decades shows that the US dollar weakens during war, according to Kathy Lien, Managing Director of FX Strategy for BK Asset Management. The US dollar fell 5% when the Libyan war started and fell 9% during the first three months of the second gulf war. The dollar was weak even during the first gulf war.

However, this time, the situation is more complex and a lot of currency movements will depend on whether China actively involves itself in the war or remains neutral. The Australian dollar, the New Zealand dollar, and the Japanese Yen will see large moves if China supports North Korea directly during the war, else the movement in the currencies is likely to be comparatively subdued.

“As the tensions grow the dollar will suffer and the actual announcement of war could take USD/JPY to 105 but if it’s a swift victory the pair would also recover quickly,” said Kathy.

Though historical evidence gives us some idea about the possibilities, every new war is different because it involves different nations and affects different asset classes.

What sectors will be affected if a war with North Korea takes place?

Commodities

North Korea, in itself, can’t impact commodity prices. However, it is surrounded by nations that are major consumers of commodities. China is one of the major consumers of commodities, however, it is unlikely that the war will impact China’s consumption materially.

South Korea is a major importer of coal and exporter of steel. Both these commodities will be majorly impacted because South Korea will be severely affected if a war breaks out. Similarly, liquified natural gas prices will be affected, as Japan is its largest importer in the world.

The seaborne trade will also be severely affected because China, South Korea, and Japan receive about one-third of the global seaborne crude supplies. Similarly, 84% of the world’s iron ore and 47% of the metallurgical coal reaches the shores of these three nations through the seaborne route.

The agricultural commodities will also be affected because China is a major importer of rice and soybeans while Japan is of corn.

Economic costs of the war

War has both a direct and an indirect impact on the economy. South Korea is a hub for manufacturing liquid crystal displays, semiconductors, and cars. A war will impact these activities, leading to a shortage across the globe. The alternative suppliers can’t bridge the gap in such a short span of time. Therefore, prices of various electronic products are likely to rise significantly, which will impact the developed economies, including the US.

“U.S. spending on electronic items, including smart phones, cameras, tablets and computers accounts for roughly 1 percent of the consumer price inflation basket. If a war in Korea caused prices of these items to double, it would add 1 percentage point to U.S. inflation,” a report by the research consultancy Capital Economics warned, reports CNBC.

If inflation rises sharply, the Central Banks will be forced to raise interest rates, jeopardizing the fledgling global economic recovery.

Additionally, if South Korea’s gross domestic product (GDP) falls by about 50% due to war, it will reduce the global GDP by 1 percentage point, according to the report.

Once the war ends, South Korea will need huge capital to rebuild its infrastructure. If the US involves itself and ends up spending the same amount as it did in Iraq and Afghanistan, then the federal debt will reach 105% of GDP, the economists at Capital Economics warned.

Conclusion

Though historical evidence suggests that the equity market returns are better than average during a war, the situation might be different this time because of the nations involved. Any jolt to the weak economic recovery across the globe will dent the confidence of the investors. Therefore, we don’t expect the stock markets to rise substantially during the war.

Gold’s performance is somewhat neutral and it can be used to protect the value of the portfolio. Therefore, selling some overvalued stocks and buying gold might be a good strategy if a war seems imminent.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 9 rated postsRakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.

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